Is Corporate Social Responsibility in Japanese Firms at the Theoretically Derived Achievable Level? An Analysis of CSR Inefficiency Using a Stochastic Frontier Model

Abstract

AbstractThe purposes of this study are to investigate whether current corporate social responsibility (CSR) is at the theoretically derived achievable level (hereinafter referred to simply as achievable level), to introduce “CSR inefficiency” as the difference between actual and achievable levels of CSR, and to specify its determinants. We established that the achievable level of CSR activity is determined by a range of keiretsu group, government, sector, and resource factors, and choosing specific activities can affect the priority levels of social contributions. CSR inefficiency is affected by its own factors such as internal management, which are different from those of CSR activity. Our study suggests the importance of the differences between the achievable levels of CSR among firms. For example, firms in machinery, electrical equipment, public utilities, and service industries have greater inefficiency in environmental CSR than the other industries. Conversely, the achievable levels of construction and petroleum and gum industries for environmental CSR are higher. Service firms can achieve higher level of environmental CSR, although their emissions and wastes are not as large as those of manufacturing firms in general. In retail industries, the achievable level of environmental CSR is lowest among all industries, while those for labor issues and social contribution are as high as those of other industries. Public utilities have large CSR inefficiency compared with other industries, while construction, steel and nonferrous metals have small CSR inefficiency.